Disclaimer: The information in this blog represents the opinions of its author and is for educational purposes only. It is not intended as investment advice. Cryptocurrency markets are extremely risky so you should only invest money you are willing to lose.
Amazon & Starbucks Know You
Amazon knows you like spiky blue suede sneakers by Christian Louboutin. Starbucks knows you like coconut milk in your latte.
As a matter of fact, nearly everything about you - financial, medical, legal, personal - from where you vacation to how often you fill up your gas tank, is stored on someone else's computer, somewhere in the world.
A Chaotic System
You probably don't spend a lot of time thinking about all your personal information scattered throughout cyberspace, but if you stop for a moment to ponder how strange it all is, you'll also realize that it's a pretty chaotic inefficient system.
Changing a password or getting a new credit card - the mere thought of it gives me a headache. The simple act of changing an address can create a days long to-do list, and even then there are almost certain to be annoying glitches that pop up months and even years later.
Centralized Databases? Not So Much...
The reason it's such a hassle just to change your address can be summed up in 2 words: centralized databases. The data on the central computer of every merchant, bank, credit card, utility, government agency, etc.... , has to be changed in order for you to effectively accomplish what should be a very simple transition. If your bank has separate servers for accounts, loans, and credit cards... well, you get the picture.
A Better Way
There's a better way to store and verify data - it's called blockchain.
If you're like I used to be - eyes glaze over when somebody mentions "blockchain" - stay with me on this. I'll make it super-simple and tell you how blockchain technology can make you money.
How Decentralization Works
How in the world can DE-centralization be more efficient and organized than centralization? Here's how:
Cryptography is a special kind of math that is really really really hard to solve but ridiculously easy to verify. While a cryptographic math puzzle might take your computer the age of the universe to solve, if I sent you a chain of data linked by those same puzzles along with their solutions your computer could verify the validity of the data in a matter of milliseconds.
That's what a blockchain is - a string of data that is sealed into blocks and locked into order in a chain by cryptographic math puzzle solutions that were achieved by thousands of computers working together in a math puzzle race.
Math As The Keeper Of Truth
The result is a database secured by math that can be distributed throughout an entire network and independently mathematically verified by any computer on the network without the need for a central authority to be the final word or keeper of truth.
The fact that it's distributed everywhere means that any computer can snag a complete copy of all the data, the integrity of which is secured by the extreme difficulty of the math puzzles - making the chain virtually impossible to alter, counterfeit, or otherwise corrupt.
Math is the keeper of truth, and there is no hacker or computer that can change mathematical truth.
Ethereum - The Coin That Powers Blockchain
As cryptocurrencies go - ethereum (actually, the currency itself is called "ether") is much more than a store of value or a speculative investment. It is the coin of the ethereum network which facilitates the creation of innovative new blockchain applications.
But replacing centralized databases with blockchain barely scratches the surface of what the ethereum network is capable of.
Built into the technology is the ability to easily create smart contracts, which, like robot lawyers, can automatically execute the terms of complex agreements when certain conditions are met. So in addition to revolutionizing value and information transfer, ethereum has the potential to eliminate the need for third parties in many types of transactions. To simplify the basic concept - imagine an apartment door that only unlocks if the rent is paid.
The Blockchain Revolution
The financial world is in agreement that blockchain technology will revolutionize the transfer, verification, and storage of every type of information, asset, & store of value. This enthusiasm is behind the massive runup in ethereum price this year, from about $10 to more than $330. A $10,000 investment in blockchain technology in January would already be worth over $3.3 million - in just 10 months!
Massive Future Upside Potential
But the true potential of smart contract technology has yet to be fully realized as only a tiny percentage of potential applications have been introduced into the marketplace. As a Nasdaq report on the future of banking put it, "smart contracts could soon extend far beyond the movement of digital cash and be used to effectuate business activities involving purchases and exchanges of virtually any tangible or intangible goods, services and rights (e.g., sales of securities, commodities, personal property, real estate, digital rights, etc.)."